One of the many things wrong with Prime Minister Boris Johnson’s speech on housing was his analysis of the Universal Credit housing benefit element, and how much of this is being ‘wasted’.
SHAC agrees with the view that an unreasonable amount of taxpayer’s money is being poorly used through housing benefit payments, but we strongly disagree with government’s analysis of the causes, and their proposed solution.
Johnson makes the point that:
“When ownership remains beyond the reach of a great many hard-working people, it’s neither right nor fair to put ever-vaster sums of taxpayer’s money straight into the pockets of landlords.
“The total bill for Housing Support stands at about £30 billion each year, and the Office for Budget responsibility has warned that if we don’t take action, it could reach £50 billion by 2050.
“That is cash, taxpayer’s cash that is being simply swallowed to pay the mortgages of private sector landlords or by housing associations.
The glaring omission from Johnson’s last paragraph is reference to the considerable chunk of housing benefit that is spent on service charge payments, including those levied by housing associations.
The Service Charge Scandal
The housing association sector collected around £1.5 billion in service charge payments from tenants and residents in the year to April 2021 according to the Regulator of Social Housing.
There are around 4.4 million social renters, and around one million of these receive the housing element of Universal Credit, according to Inside Housing, who add that the numbers receiving this benefit grew by 46% between March 2020 and February 2021.
However, the scandal is that there is apparently zero government scrutiny of the validity of service charge payments – even when they are paid by Housing Benefit. The money is just handed over without question.
Research conducted by SHAC exposed a shocking level of inaccuracies in service charge bills amongst members. Errors which increased bills by between 51% and 100% were evident in almost half the cases reviewed, and 12% of respondents had errors which more than doubled their bills.
The research has been reinforced time and again by our members experiences as highlighted on these pages. In Optivo On Trial Over Service Charges we reported on residents who had been refunded just over £600,000 in three years after exposing inaccuracies in their charges.
Residents say that there is more to come, and crucially
“if it hadn’t been for our challenges and constant digging into the accounts, we would probably have never got a penny.”Optivo Resident
This is a common refrain, but only from those who pay for the charges directly. Those whose service charges are covered by housing benefit rarely take on the excruciatingly attricious and difficult process of checking their service charges themselves. Councils processing the payments do not have the resources to scrutinise receipts and invoices. And while large refunds are made to self-paying residents, we have yet to hear of any housing association refunding the benefits system after taking what was not rightfully theirs.
The Conservative-Liberal Democrat coalition government introduced a benefit cap in 2013 in response to high housing benefit levels. It left hundreds of thousands of renters in dire financial straits having to find extra income to cover the shortfall.
This time round, Johnson proposes an equally absurd course of action by changing the rules on benefits “so that the 1.5 million working people who are in receipt of housing benefits and want to buy their first home will be given a new choice: to spend their benefit on rent as now, or put it towards a first-ever mortgage.”
This action derives from an ideological obsession with home ownership which views renting as inferior, and social housing as particularly abhorrent.
Johnson’s speech is littered with evidence of this mindset. He bemoans the fact that “there are still 1.6 million households living in council homes. But there are now 2.5 million households whose homes belong to housing associations – and they are trapped”.
Johnson and the rest of the Conservative government propose to resolve this unhappy state through the provision of mortgages covering 95% of the price of a home, meaning buyers only need find a deposit for the remaining 5%.
This is a view from a fantasy land in which the salaries of ordinary workers and the benefits system are generous enough for all to climb the property ladder
Further, high level mortgages were widely promoted in the 2000’s and contributed to 900,000 people diving into negative equity (a condition where the value of the home drops below the size of the mortgage) when house prices crashed in 2008/09. A recurrance of an economic crash would leave the most financially vulnerable people facing the worst impact.
SHAC and other housing campaign groups have condemned Johnson’s housing speech on many levels, and none seem to believe the proposed measures will do anything to fundamentally address the housing crisis. Even taking the narrow government concern to reduce the housing benefit burden on taxpayers, there are three immediate actions that could be taken which would make a meaningful difference:
Legislate to end the service charge rip-off – Landlords should be forced to put all service charges through externally audited accountants, and to bring auditors in to check service charge systems. The practice of routine over-charging, phantom charging, and delayed refunds must be ended, and a much tougher set of sanctions must be applied to landlords for repeated and inexcusable inaccuracies. This would reduce the scale of corporate landlord fraud against housing benefit.
Cap rents at genuinely affordable levels – This would likewise reduce the housing benefit bill and allow more housing stock to be built. It would enable more people to save for a deposit on a house purchase.
Build more council housing to be let at social rents – Although it has problems as a tenure, this is currently the most democratic form of tenancy, falling under the responsibility of elected councillors.
The much-trumpeted figures on taxpayer-subsidised new homes often hide the fact that few are built for cheaper social tenancies. Instead, councils and housing associations increasingly build to let or sell at full (and rising) market prices, or for the problematic shared-ownership scheme.
A steady supply of genuinely affordable homes would take the heat out of the housing market and reduce the housing benefit bill.
A United Fight
SHAC and other housing campaign groups will continue to press for meaningful solutions to the problematic relationships between landlords and tenants. Please join us.
10 June 2022
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